Second Circuit Reverses Dismissal on Standing Grounds

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It’s axiomatic that – at the pleading stage – all inferences are to be drawn in plaintiffs’ favor. All well pled allegations are to be taken as true.

Yet complaints are often nitpicked, especially by defendants who foresee trouble once discovery is underway.  They search for holes in the pleadings, even when (or especially when) those holes are likely to be filled later with evidence.

That strategy often works.  So plaintiffs can take solace in the new Second Circuit opinion that not only reiterates these general principles, but expressly relies on them to form the backbone of its opinion.

The case is John v. Whole Foods Market Group.  Plaintiff alleged Whole Foods systematically overstated the weights of prepackaged foods, leading to overcharges for its customers.  The case followed a New York Department of Consumer Affairs investigation, which concluded some 89% of Whole Foods’ prepackaged foods featured overstated weights.

Whole Foods moved to dismiss on standing grounds.  It argued that just because the weight of 89% of its food had been overstated, that didn’t necessarily mean that the weight of plaintiff’s food had been overstated.  So, Whole Foods argued, plaintiff could not plausibly allege that he overpaid.  Whole Foods also sought dismissal on the ground that the complaint lacked details about the New York investigation’s methodology.… Read more

The Supreme Court Puts Personal Jurisdiction On Trial

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Leslie Brueckner of Public Justice and I just wrote an article for Law360 about a pair of cases before the U.S. Supreme Court concerning personal jurisdiction. You can find the article on Law360 and also below.

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Remember personal jurisdiction, the topic that everyone slept through during law school? Guess what? Personal jurisdiction is no longer boring: in fact, it’s become the hottest new corporate defense strategy, particularly in the area of mass torts.

And it’s now before the U.S. Supreme Court, in two cases argued on April 25, 2017: Bristol Myers Squibb Company v. County of San Francisco (BMS) and BNSF Railway Co. v. Tyrrell (BNSF). Unfortunately, judging from the way things went during oral argument, the outlook for plaintiffs seems bleak.

Ever since 2014, when the U.S. Supreme Court decided Daimler A.G. v. Bauman, 134 S. Ct. 746 (2014), corporations have been raising personal jurisdiction as a threshold defense to stop injury victims from getting a hearing on the merits of their claims. And, in many cases, the courts are agreeing with them, and throwing the victims’ claims out of court.[1]

BMS and BNSF will decide the viability of that strategy — with major implication for injury victims’ ability to seek justice in a forum of their choosing.… Read more

Toyota Can’t Enforce Dealer Arbitration Agreements (11th Cir.)

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In a recent unpublished opinion, the Eleventh Circuit refused Toyota’s request to compel arbitration against one of its customers.  This decision is consistent with several others, including in the Ninth Circuit.

In Drayton v. Toyota Motor Credit Corp., plaintiff sued Toyota for violating the TCPA and Florida’s analog statute. Toyota moved to compel arbitration, pointing to the purchase contract entered into between plaintiff and her local dealership.

Toyota, like most automotive manufacturers, does not sell vehicles directly to its customers.  So as is typical of vehicle purchase transactions, Toyota was not a party to the purchase agreement.  And Florida law, like many other states, does not ordinarily allow non-signatories to enforce contracts.

Toyota sought to exploit an exception, arguing that under the equitable estoppel doctrine, plaintiff could not seek to hold a party to the terms of an agreement while simultaneously trying to avoid the agreement’s arbitration clause.  The problem?  Plaintiff was not seeking to hold Toyota to the terms of the agreement.  Her claims stemmed from Toyota attempting to collect a consumer debt.

The Eleventh Circuit’s decision continues the consumer friendly trend of disallowing automotive manufacturer attempts to avoid liability by pointing to the forced arbitration clauses in their dealers’ contracts. … Read more

11th Cir.: VPPA Violation Satisfies Spokeo

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The Eleventh Circuit yesterday joined several other courts in holding that a bare procedural violation of the Video Privacy Protection Act confers Article III standing under the Supreme Court’s Spokeo decision.

In Perry v. Cable News Network, the plaintiff alleged that a downloadable CNN app for smartphones tracks and records user’s views of news articles and videos. Plaintiff alleged that when a user closes the app, CNN sends the viewing activity and other data to a company called Bango, a third party company that conducts data analytics.

CNN moved to dismiss, arguing plaintiff failed to allege a legally cognizable injury under Spokeo because the alleged violation of a statutory right is not on its own sufficiently concrete.  The Eleventh Circuit disagreed:

Perry has established his standing to file this action because his alleged injury is sufficiently concrete. Although Perry does not allege any additional harm beyond the statutory violation, the Supreme Court has made clear that our analysis does not end there. See Spokeo, 136 S. Ct. at 1549. Instead, “the violation of a procedural right granted by statute can be sufficient in some circumstances to constitute injury in fact” so that “a plaintiff in such a case need not allege any additional harm beyond the one Congress has identified.” Id.; see also Havens Realty Corp.

… Read more

California Supreme Court Issues Consumer-Friendly Arbitration Ruling

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The year 2017 has brought in several consumer-friendly arbitration rulings, with several federal appellate courts refusing to enforce arbitration clauses.   Today, the California Supreme Court followed suit, ruling that a Citibank arbitration provision did not bar its customers from proceeding in court with claims seeking a public injunction under California consumer protection law.

Dating back to 1999, in its decision in Broughton v. Cigna Healthplans of California, 21 Cal.4th 1066 (1999), the California Supreme Court has held that California law does not permit arbitration of claims brought for broad, public injunctive relief.  The Court reaffirmed that principle in 2003 in Cruz v. PacifiCare Health Systems, Inc., 30 Cal.4th 303 2003).  And it has remained in effect, at least in California state courts, ever since.

The US Supreme Court’s Concepcion decision in 2011 engendered doubt as to whether the Broughton and Cruz decisions remain in effect, or whether they are instead preempted by the Federal Arbitration Act.  A series of district court decisions in 2011 and 2012 reached differing outcomes, and the Ninth Circuit ultimately ruled in Kilgore v. KeyBank N.A. that the FAA does preempt the Broughton-Cruz rule.

Today’s California Supreme Court ruling in McGill v. Citibank appeared poised to either contradict or fall in line with Kilgore.  … Read more

BMS v. Superior Court Shouldn’t Affect Personal Jurisdiction in Class Actions, Solicitor General Says

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We’ve been closely watching the pending U.S. Supreme Court case Bristol-Myers Squibb Co. v. Superior Court, because the personal jurisdiction question put to the Court could greatly affect where (and how) mass torts are litigated. In this case, California plaintiffs and nonresident plaintiffs are suing BMS for injuries allegedly caused by Plavix, a cardiovascular medication that the company created and marketed in the US. The Court is being asked to decide whether Bristol-Meyer Squibb’s California activities are sufficiently related to the nonresident plaintiffs‘ suits to support their invocation of specific jurisdiction in California.

A lingering question in our minds has been whether the answer to this question would also resolve questions regarding personal jurisdiction in class actions in which a single court is asked to rule on class claims of resident and non-resident plaintiffs. The (acting) Solicitor General has now filed an amicus brief in support of BMS, and his answer–No–is quite the surprise.

Here’s what the SG had to say:

The issue before the Court, as framed by Bristol-Meyers Squibb, is “whether a plaintiff’s claims arise out of or relate to a defendant’s forum activities when there is no causal link between the defendant’s forum contacts and the plaintiff’s claims—that is, where the plaintiff’s claims would be exactly the same even if the defendant had no forum contacts.”

This case does not present any question concerning whether a state court may entertain class actions, under established rules, to resolve claims arising from conduct in multiple jurisdictions.… Read more

3d Cir. Refuses to Compel Arbitration

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Last week, the Third Circuit was presented with an arbitration issue that dealt with, as the court put it, “an unusual hybrid of technology.”  The defendant had offered services through an interactive telephone system.  But the contract that purportedly bound plaintiffs to arbitration was located exclusively on defendant’s website.

Because of the disconnect between the phone-based interaction between the parties, on the one hand, and the web-located terms of service, on the other, the court declined to compel arbitration.  James v. Global TelLink Corp., — F.3d —, 2017 WL 1160893 (3d Cir. 2017).

The court emphasized that while defendant informed telephone users their service was governed by website terms, users were not required to visit the website or otherwise demonstrate acceptance of the website’s terms.

The Third Circuit then distinguished various lines of cases.  It distinguished cases where plaintiffs had “manifested assent through the affirmative act of signing contracts”; where the contractual terms had been “immediately accessible to online users”; where plaintiffs had “received a copy of the contract with their [purchase] and conceded that they had notice of the [relevant] clause”; and where the plaintiffs “received physical copies of the terms and conditions upon opening the products, and their subsequent use of the products manifested assent.”

The court concluded by emphasizing that while arbitration is a favored remedy where the parties assent to its use, arbitration cannot be compelled where one party did not agree to arbitrate:

Congress has made clear that arbitration is an important federal policy and the Supreme Court has vindicated that policy many times.

… Read more

Beware Intended Consequences of Class Action Reform, Too

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Dave and I wrote this article for Law360, which was published today. Here it is in its entirety.

On March 8th, Law360 published an article from two class action defense lawyers who argue that the anti-class action bill currently working through Congress (known as H.R. 985) doesn’t go far enough in its quest to “stem[] class action litigation.”  They call in particular for legislation designed to mitigate the “in terrorem effect” that they insist causes corporations to “settle truly meritless claims.”

This in terrorem boogeyman has been trotted out for decades, every time that a pretext is needed to close the courthouse doors to victims of corporate abuse.  Let’s shoo away the boogeyman this time around, rather than again allowing dramatic changes to the law.  There are many good reasons to do so.

For one, studies of class actions and class settlements—including by the Federal Judicial Center—do not support the intensely negative view of litigation as blackmail.[1]  “[T]he class action is more nearly a shield than a sword.  It has protected companies from bankruptcy, but it appears to have rendered few companies insolvent, if any.”[2]

The blackmail analogy has no empirical backing. Again and again, scholars have debunked the myth that class actions foster extortionate claims.… Read more

Class Cert Appeals & the Muddy Waters of the 9th Circuit

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In less than two weeks, the Supreme Court will hear oral argument on the following issue: Whether a federal court of appeals has jurisdiction to review an order denying class certification after the named plaintiffs voluntarily dismiss their individual claims with prejudice.

The underlying decision, which we’ve written about previously, is the Ninth Circuit’s ruling in Baker v. Microsoft.  In Baker, the district court struck class allegations, Plaintiffs sought leave to appeal under Federal Rule of Civil Procedure 23(f), and leave was denied.  Plaintiffs then voluntarily dismissed their individual claims with prejudice and appealed.  The Ninth Circuit concluded it had jurisdiction because the dismissal – even though it came by stipulation – was “sufficiently adverse” to be an appealable final decision.

With the Supreme Court poised to rule in Baker, the Ninth Circuit recently issued a second published decision involving a similar issue. Bates v. Bankers Life & Casualty Co.  In Bates, as in Baker, the district court granted a motion to strike class allegations.  From there, the posture of the cases diverged.  Rather than voluntarily dismissing with prejudice (as in Baker), the Bates plaintiffs filed an unopposed motion for entry of final judgment pursuant to Federal Rule of Civil Procedure 54(b).… Read more